The rise of real-time digital payments in Southeast Asia
Real-time payment schemes are joining the forefront in Southeast Asia, with many customers now preferring the payment method over cash, a shift due to varying payment essentials and interests amid the COVID-19 pandemic.
Out of 6,000 consumers polled in Indonesia, Thailand, Singapore, and Malaysia, 61 percent chose real-time digital payment schemes as their favored method of payment in 2021 – neck and neck with cash, and higher than digital wallets requiring cash or card top-ups (56%) and credit cards (30%).
Thailand and Singapore are the most enthusiastic users of real-time digital payment, with 72 percent and 64 percent of respondents choosing the payment method, respectively.
Top three preferred payment methods in key Southeast Asian markets, Source: Real-Time Goes Mainstream, ACI Worldwide, 2021
This signals a significant shift in Southeast Asia, where cash has long reigned supreme. According to Merchant Machine statistics, cash transactions account for 37 percent and 26 percent of all transactions in the Philippines and Vietnam, respectively — the highest percentages in Southeast Asia.
Thailand, Indonesia, and Malaysia have lower cash consumption, accounting for 16%, 13%, and 11% of all transactions, respectively. Surprisingly, Singapore has the lowest cash use, accounting for only 2% of all purchases.
The rapid transition to real-time digital payments is the result of fast-updating technical progress and changing customer expectations. 70% of the population in the region's six major economies is already online, with 40 million connected for the first time by 2020. According to the research, more than one-third of Southeast Asian consumers have begun using a new type of online service as a result of COVID-19, and nine out of ten plan to continue using at least one such digital service post-COVID-19.
Online payment trends increase in real-time
Real-time payment transaction volumes are expected to skyrocket in the coming years. Malaysia is expected to top the pack, with a five-year compound annual growth rate of 83.9 percent, rising from 68.7 million transactions in 2020 to 1.45 billion by 2025, according to the report.
According to these predictions, Malaysia would be the world's third fastest-growing market for real-time digital payments, trailing only Croatia (374.4 percent) and Colombia (112.7 percent ).
Top Five Fastest Growing Markets for Real-Time Payments (Five-Year CAGR 2020-2025), Source: Real-Time Goes Mainstream, ACI Worldwide, 2021
Thailand, which is now the world's fourth largest marketplace for real-time digital payments, with 5.2 billion transactions in 2020, is anticipated to witness volumes increase by 32% to 31 billion. Likewise, Singapore's real-time online payment volume is expected to rise by 23.3 percent to 393 million by 2025.
Real-Time Payments in SEA by Transactions (Five-Year CAGR 2020-2025), Source: Real-Time Goes Mainstream, ACI Worldwide, 2021
Four of the world's top five real-time digital payment markets in 2020 will be in Asia, demonstrating how the region has been a pioneer in real-time transactions and how payment reformation initiatives have paid off. Thailand is joined by India (25.5 billion transactions), China (15.7 billion), and South Korea (6 billion).
Top Five Global Markets for Real-Time Payments in 2020 by Volume, Source: Real-Time Goes Mainstream, ACI Worldwide, 2021
Southeast Asia's real-time payment schemes
Singapore was the first country in the area to implement a real-time payment mechanism, establishing Fast and Secure Transfers in 2014. (FAST). FAST allows retail and business clients of participating banks to transfer funds 24 hours a day, seven days a week, and maybe accessible through the banks' Internet banking services.
PayNow, a second plan, was introduced to consumers in 2017. PayNow is a peer-to-peer (P2P) quick financial transfer service built on FAST that lets users to transfer cash from one bank account to other using proxies such as a mobile phone number or a national identity (ID) card number.
Thailand launched PromptPay, a real-time payment system, in 2017. PromptPay, like PayNow, allows customers to receive and send payments using only a national ID number or a phone number. The program, which is part of Thailand's National e-Payment project, was first meant to provide government benefit payouts.
Singapore and Thailand connected their two real-time payment systems this year to enable rapid and smooth cross-border payments.
Finally, in 2018, Malaysia introduced its real-time payment network DuitNow, which allows customers to quickly transfer cash using a cell phone or an ID number. In June 2021, DuitNow began integrating with Thailand's PromptPay system, facilitating cross-border QR payments between users in the two countries.
In the meantime, in 2019, Bank Indonesia introduced the Quick Response Indonesia Standard (QRIS), which establishes standardized QR code requirements for mobile payments. The BI-FAST real-time payment system in Indonesia is currently in development, with individual credit transfer services anticipated by the end of 2021.